Today's Must Read
EOG Resources (EOG) Gains on Eagle Ford, Well Expenses High
Simon Property (SPG) to Gain From Portfolio Revamp Efforts
Friday, September 21, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Netflix (NFLX), EOG Resources (EOG) and Simon Property Group (SPG). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Netflix’s shares have increased +90.3% year to date, significantly outperforming the Zacks Broadcast Radio and Television industry’s gain of +32.6% during the same period. The Zacks analyst thinks Netflix’s expanding original movie slate, strong regional content portfolio and aggressive spending will help it steer away competition.
The portfolio strength helped the company win 23 trophies in different categories, which was equal to HBO, in Emmy Awards 2018. Moreover, partnerships with telcos like Telefonica in Spain and Latin America as well as KDDI in Japan are expected to boost subscriber addition.
Meanwhile, estimates have been stable lately ahead of the company’s Q3 earnings release. The company has mixed record of earnings surprises in recent quarters. Nevertheless, the company’s increasing marketing spending is likely hurt profitability, unless subscriber addition rebounds.
Further, strengthening U.S. dollar doesn’t bode well for operating margin expansion. Cash burn is also expected to continue in the near term.
Shares of EOG Resources have gained around +26.1% over the past year, outperforming the Zacks Oil & Gas E&P Industry, which has gained +11% over the same period. The company holds premium acreages in the Permian, Bakken and Eagle Ford shale plays where it has identified 17,000 premium wells that could lend access to almost 11.3 billion barrels of oil equivalent estimated potential reserves.
In the Eagle Ford alone, EOG identified 7,200 locations that will drive the firm’s oil production. During 2016 and 2017, almost 50% and 85% of the wells drilled by EOG Resources met the standard of premium wells. Notably, the firm expects almost 90% of the wells to meet the standard in 2018.
However, escalating lease rates and well operating expenses are hurting the company. Also, lack of exposure to international resources is a drag.
Simon Property Group’s shares have outperformed the Zacks Retail REIT industry over the past three months (+4.2% vs. -8.7%). The Zacks analyst thinks the trend in estimate revisions of current-year funds from operations (FFO) per share indicates a favorable outlook for the company.
Recently, the company, along with Noble Investment Group, announced the inauguration of the Homewood Suites by Hilton Edina Minneapolis. The hotel is part of Southdale Center's mixed-use development. Notably, Simon Property has a diversified exposure to retail assets in the United States and abroad. It boasts a strong and improving balance sheet.
The company’s focus on transforming its properties is aimed at creating multi-use destination to drive footfall. Transformational plan includes addition of hotels, restaurants, residences and luxury stores.
Yet, the implementation of such measures requires a decent upfront cost and therefore, would limit any robust growth in its near-term profit margin. Rate hike adds to its woes.
Other noteworthy reports we are featuring today include Disney (DIS), Morgan Stanley (MS) and Sprint (S).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>